Adjust the market price with the slider to see how a perfectly competitive firm's output, profit, and short-run decisions change.
Current Price:$10.00
Profit/Loss:$0.00
Output ($Q$):0
Key Points to Observe:
Profit ($P > ATC$): The firm earns a positive profit. In the long run, new firms will enter the market, increasing supply and pushing the price down.
Zero Profit ($P = \text{min } ATC$): The firm earns zero economic profit. This is the long-run equilibrium. No firms enter or exit the market.
Loss ($ATC > P > AVC$): The firm operates at a loss. In the short run, it continues to produce to cover its variable costs. In the long run, firms will exit the market, decreasing supply and pushing the price up.
Shutdown Point ($P = \text{min } AVC$): If the price falls below the minimum AVC, the firm cannot even cover its variable costs. It should shut down immediately to minimize its losses.